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tv   Squawk on the Street  CNBC  July 23, 2013 9:00am-12:01pm EDT

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>> caterpillar, boeing, ford. >> 4.6%. >> pepsi, delta, ford. a lot happening. make sure you join us tomorrow. that does it for us today. right now it's time for "squawk on the street." good tuesday morning, welcome to "squawk on the street." we are awash in earnings from some of the biggest companies in the world. utx, dupont, travelers, ups, all sharing the stage as we look at futures this morning. a lot more to come tonight with apple, panera and at&t. our road map begins with earning season in full force. dupont, ups, travelers all on deck. >> netflix getting hit. a bit short of what wall street was expecting and exclusive
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comments from reid hastings. >> i hope you're hungry news on dominos, wendy's a bunch of food companies and throw dupont in there, if you wanted. >> that's what they want you to say. sorry, kids, no more kids' meals at taco bell. will other fast food chains follow? >> we'll start with dupont. shares on the rise this morning. the dow component beating the street with $1.28 and revenues coming in a bit shy of consensus. dupont considering a sale or a spin off of its chemicals business. ellen spoke about that unit earlier on "squawk" earlier this morning. >> volumes were up sequentially year over year, but off from last year's market. a cyclical and volatile segment for us. that's the segment that is undergoing review of strategic alternatives. >> second largest sales generator, jim, behind aggs. she has not spoken to nelson
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peltz yet. >> this is one of these moments where it makes a ton of sense. if you listening, the stock was at 54. you just caught a 10% move. what is important here is that a lot of people felt that division is how they can pay the dividend. that is the bed rock of dupont's earnings. what she is saying, listen, we'll be a growth company and we don't need that. she said on "mad money" committed to the dividend even with this kind of posture. what can i say? the rest of the business looks a lot like monsanto, which is a high-growth company. looks like a food company that you mentioned. they make a lot of different foods. a safety company. safety plays tend to get higher multiples. this is the high-multiple transportation. seeing this a lot. a lot of companies. anxious to get higher multiples and be treated with more respect by wall street. >> will it work? let's remember we already got a warning from dupont, previous to
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this, right? >> talking more positive. >> gross margens were down to 38.5% to 1%. the quarter was not a great quarter. >> you want a higher multiple, faster growing company, she's going to give to you. >> or try to give it to you. >> right. i think we're in forgiveness mode. >> right. on the peltz story, sorkin reported that he had the interest. he would not discuss dupont. what he wanted to discuss at length probably because he was out of options is the whole pepsi. my sense of that is you only discuss it so publicly when you're sort of at a desperation. nobody else to talk to. >> speaking of that moment at delivering last week, this is andrew with nelson peltz last wednesday. >> i learned literally in the past two hours that you have just amassed a very big stake in dupont. can you comment on that? >> andrew, you asked me in the green room about ten minutes
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ago. if you say dupont, what comes to mind? remember i told you. >> he says that in a pejorative sense. >> we know that the paint business for automotive was sold in april. this is about that whitener, you look in your toothpaste how does that become white? from this one very cash cow product that they have. you sell the cash cow. by the way, this cash cow has been because of tremendous oversupply. but pricing has come back a little. again, i think what people are going to say, no analyst, no analyst i know embraced this strategy. because they fear that they get rid of the cash cow and the company will not be able to deliver the rest of the earnings. so, i mean, this is a stock, thank heavens, i get bad ones and i have some good ones. i will tell you this, this is a like move by a marketplace that
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wants stocks to get higher multiples and will do whatever is necessary. hence peltz with pepsico. that's what they're looking for. multiple expansion by the companies themselves. >> while we're at big industrials. let's quickly do utx. $1.70 revenue short, again. although they are telegraphic a return to organic growth. >> look, it's aerospace. heard that from bea this morning and hear that tomorrow. talking about a 20-year earning cycle. i mean, that's, that's a lot. aerospace is you can't get a dreamliner until 2019. odwho sells into thaingo do qui. i thought the quarter looked fine. crushes $1.60 lower catastrophic higher margins. some rates creeping up not too bad for the big insurers. >> look, you raise rates and you
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keep that loss, the losses down to a level that are pretty good. traveler has been amazing stock. this is selling well over book value, but just an incredibly well-managed company, as you know. >> manages risk well and does a great job with their book. >> a conservative company doesn't take a lot of risk doing everything right. these dow stocks, i don't know. journal said yesterday, companies aren't doing that well. i guess i defer and i refuse to. >> you refuse to. >> maintain this is a good earnings season. >> yes, i do. look, okay, so, we had mcdonald's not doing that well and wendy's looking okay. could be the pretzel burger. we had coca-cola not doing that well. i bet you see pepsico could be okay tomorrow. carbonated soft drinks and burgers aren't selling that well. >> microsoft do too well. intel was not great. >> alcoa, not a barn burner. >> should we just gang up on
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them? >> okay, we'll give you jpmorgan, how about that. >> bank of america. i want bank of america and i want it now. >> you get it. you get that one. >> finally a, u.p.s., $1.13. revenue missed even despite the preannounce. >> you're calling that twice. you're using a double. you're double counting negatives. >> package growth domestic 1.9. it was 4.4 last quarter. >> that was big. >> some discussion that maybe customers are hedging these labor negotiations. you don't want to make a big purchase ahead of the resolution. >> that could be. look, they're talking about people not needing to ship things as fast. u.p.s. is part of that cohort which says, you don't get too excited here. a lot of companies doing incredibly well, including this morning. i don't know if you saw a little one. this is on private mortgage insurance. this is still one more level of the banking community that is
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doing quite well. cybersecurity doing quite well this morning. >> in fact, it's on fire. that's the cisco acquisition. 76 bucks a share. >> i'm no longer willing to call this a mixed earnings period. i'm saying it's a positive earnings period. >> you can keep saying it, too. >> did you see -- >> i missed that. >> did you see spain? >> i didn't see spain. >> spain wasn't so bad. >> i'll tell you something that didn't look that great after hours and that was netflix. the shares were falling and post marked it yesterday. the premarket today. although not as badly as it looked in the early going. company did add about 630,000, 630,000 new u.s. video screening subscribers for the second quarter, of course. but it was below what had been forecast and that news overshadowing better than expected earnings. cnbc exclusive.
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reid hastings. >> you're spending $2 billion on content around the world and able to grow as we're able to get more and more and how we pay it it off is we have nearly 38 million members paying about $8 a month. that's enough money to pay for all that content. >> he threw -- >> hulu and amazon more aggressive. there is competition here. they are still, by far, the leader. they should be compared most closely to hbo which makes $1.5 billion what netflix does but netflix is in growth mold. >> a lot of people worried, this was adverseural. and referred to anger managem t management.
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not this one. no anger management on this call. >> they went at them. >> kudos to them. >> a lot of comments that yahoo! call won on style with their nightly news set but the netflix call won on substance. >> very nice. >> and a lot of props last night. >> now, international losing money. if they get international going, then, obviously, this is a whole other leg. everyone keeps pushing. when will you do the gigantic secondary? the idea that a lot of people are sure it is great to cover. the secondary, not! >> the opposite of the secondary. >> the opposite. but i love the call. i love what happened because what it says, listen, be skeptical. now, i think that netflix will end up being google. remember google shortfall, remember how bad google was, almost "wall street journal" like. >> when you say netflix is going to be google -- >> we're in a mode where fedex reports a horrible number and next time i look at it, it's up.
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>> netflix stock is going to recover in the same way google stock recovered which was described as a disappointing earning. >> reed hastings said when you start getting bigger, it's hard to grow. shocker. >> large numbers almost. >> people like jaw drop. will you cut it out? he did say that arrested development didn't give some bump. but remember, before "breaking bad" starts in august. people will have to go binge. i've been binging on house of cards. >> you are probably from the school that they're not spending enough on content. >> original content. we start getting, that we stuff. when they start, like i'm reed hastings. >> maybe there's something i don't know. >> i'm a loyal member of the netflix club. i like netflix very much and this is one of those, like amazon, where you like the product and people are doing a
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peter lynch thing, they're not looking at evaluation. valuation is absurd. you want a stock to not have high violation, is apple. >> we'll hear from apple in just a few hours. we just talked to travelers a moment ago. mary thompson has more from headquarters. mary? >> jay fishman announcing a change in strategy in the company's auto line. now, previously, travelers had basically boosted profitability or maintained margins in this business by increasing price. the company is now shifting gears and cutting price on its auto insurance and says this technology that is used by the independent agents that sell its insurance has basically changed the game. as you know, geico and progressive, they've been undercutting travelers and join in lowering prices. how does it plan to maintain margins in that business? technology will help it keep costs low. back to you. >> all right, good news for drivers.
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>> it's funny, geico kept moving me up, up, up. >> 18 minutes? how long did it take? >> about 23 minutes. i got the thing and called them and they were very low. very competitive then. i guess i already missed another cycle. >> that could be. by the way, ellen kullman ti02 oversales volume plus 18% from first quarter of the segment. just pointing that out because people are saying, wait a second, why would you sell now? >> all right, with all that in mind a lot of food for thought in the news today involving food companies. the likes of wendy's, dominos, taco bell. we'll break it down for you, next. should apple be afraid of google when it comes to new product innovation? look at that chart. pretty good action here and a lot more squawk on the street live from post 9, when we return.
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shares of wepdy's up in the premarket. hiking dividend 25% announcing plans to sell 425 company-owned restaurants to franchisees and then dominos beating the streets held by global strong sales. patrick doyle by the way one of
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kramer's guests tonight at 6:00 p.m. eastern time. domestic same-store sales. 6-7 international 5-8. do you know what the other guys, they would kill for those numbers? >> a lot of us, technology, their app billions and billions being sold. dominos has delivered now, actually did that. another 25% in the last two months. it's been remarkable story and the market capitalization still smaller than i think it should be. remarkable story, well managed. >> wendy's raises full-year guidance and north america, same-store sales, 0.3 which is essentially a third of what mcdonald's posted yesterday. >> wendy's schooling mcdonald's. i was reading that and i'm thinking, i don't know. doesn't seem to be the case. i think that there is a between fast food that is good for you and fast food that may not be so good for you. >> as in fast food. >> i mean, quick serve.
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there's a lot -- >> what has typically been fast food. which is not usually good for you. >> chipotle 5.5. domino's is pizza. they're changing their offerings. when pat came on the show and i did taste test cardboard versus the old domino's and it probably wasn't fair, i should use container board because it was pretty even. now it's pretty good. i order it with my kids constantly. it's real good. >> interestingly, speaking of kids. yum, taco bell announcing they are no longer going to have kids' meals or kids' toys in u.s. restaurants. it's less than 1% of sales. but they say they're going to focus on, it doesn't make sense to have a kids' meal as sort of a trendy brand forward brend. >> some millennials. millennials right now are going to chipotle and not taco bell.
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>> remind what it is, again? >> 20 something, essentially. >> you would have no idea. >> no, i wouldn't. i have millennials as kids. >> my kids are not going to taco bell. i like david novak and my kids like kfc, but they're chipotle. they hate the food chain. they're all thinking that cows, hey, man, i own some cows. you want to make them organic, cost you a fortune. you give them some of those medicines, whatever. you can fatten them up. that's not what the kids want. they don't want chemicals and genetically modified gmo, do you know that thing? >> i'm familiar with that. >> the europeans don't like it either. >> that's why when they move over to europe look out. it's market share. >> speaking of share, citi takes
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hershey saying they're going steel on mr. goodbar, heath and rolo. >> i had a jolly rancher before i came over. when you brief against, it's why can't be like hershey. >> when kraft was doing the cadb burry deal. they're going to lose shelf space and pricing power. oh, they've got to merge. they have to do something. >> stocks up 28% this year. this would have been a good call earlier in the year. >> they made it look like -- vand lay industries. oh, i do believe that when peltz sits down with indra report tomorrow. what the whole thing is about.
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they could become hershey. >> right. so, basically you have jolly ranchers for breakfast. >> i love jolly ranchers. >> explains a lot about your energy level. >> peltz gets to the point he has to do that in a public forum, you know he's out of options. as an activist, if you're getting something done, you're not making it public until you fail to acatually get traction with the companies in question. >> then so, in other words, delivering -- >> then when you're going out. >> that was not the beginning game, it was the end game. you don't think kullman with dupont we get -- >> that's earlier. >> that's earlier. by the way, ceo of wendy's will be a guest on "power lunch" and that's coming up at 1:00 p.m. eastern time. >> have you had the pretzel role roll? >> i have not. but getting a lot of buzz. >> kramer is here to help you navigate the waters.
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5:30 before the opening bell. time for for kramer's mad dash. >> one of my theories is that tech is in. new tech is now old. old tech is the new black. and the two that i'm looking at. reported a very good quarter and no longer involved with the
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nokia business. they're now much more automotive and industrial. look at that. that's exactly what you want to see. pacific crest says they're about to lose the apple business. the wireless and all excitement. this is also like seagate which seems to be percolating again and western digital where people are raising numbers. >> specific crest on broad com. they're saying, look out. they could lose apaal. very, very big client. so, what you've got here is this kind of moment, david, where people want to own the low multiple tech and then want to sell the high multiple tech. that has been the thing. >> slowing simply and i want to go for the value. >> people say we started paying too much for companies that sell into cell phones. i mean, t.j. rogers on, really the major -- if you go to a test. you see the great touch panel in the tesla. this is an inexpensive stock that people like.
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by the way, t.j. rogers, double down. huge stock here. they're revolting against broadcom and even our friendly cooperman. when he said qualcomm, it's like, wow. qualcomm should be much higher. part of the, no, i want micron trade. keep an eye on avnec. that's a cheap stock. >> the s&p within striking distance of 1,700. stick around to see if we hit that milestone and a lot more. nick canon among those ringing the opening bell today. he'll visit with us. we're bright back after this. more secure.
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more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you're watching cnbc "squawk on the street." the opening bell in just under a minute. big crowd here today for nick canon and h. meantime the dow two straight days of single-digit movement, jim. what are these people waiting for a fed meeting next week? >> within the dow, some major breakouts here. so, they may be canceling each
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other. but a lot of positives going on. >> with that, we'll get a look at the opening bell. loud crowd here today. get a look at the breath at the top of your screen. as we said, at the big board. howie mandel and nick canon of nbc's "america's got talent." speak with the host of the show, nick canon, in a few moments doing radio city. taking the show to radio city this season. dms funds celebrating being the first company to launch a u.s. mutual fund based on the omx baltic benchmark. >> interesting. >> keep going. >> meantime, a couple earnings we have not mentioned yet. we didn't get to texan, texas instruments. >> one thing that people have to recognize, texan buys back stock. they've got, they're good buybacks and bad buy backs. has been one of the most real out there. they have taken in a gigantic
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number of shares. >> quickly, good buyback versus bad buy back? >> just completely dulling out options and keeping it flat. which is something i'm so used to seeing technology, it's like, wow, are they buying back $1 billion shares. they're all issuing a billion, not with texas. >> so, you want shrinkage? >> what is the symbol for that? >> i know it. dupont is moving. 5% move here on dd. that's a big move for a dow component. >> that is a big move. i guess people truly like a high multiple stock and a lot of faith a in this market right now. a lot of companies where if you sell them, you look a couple weeks later and they're higher, go buy them. ellen kullman is doing what the shareholders want and what she thinks is right. the future is like dustin hoffman in "the graduate" enzymes. it's a science company, david.
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>> thank you. >> apple's tonight. we're going to be talking aboute apple. three months of fear, uncertainty and doubt. probably a nice way to sum it up, right? >> the horror. what was that the heart of darkness? conrad. really. it's an okay company and if they announce something new, that would be more and get people going. look, i'm not making a brief for apple. >> talking to us from the cave like marlin brando. >> that's very good. >> wow. >> you're saying tim cook is colonel kurtz. that description of the darkest days. i mean, the company is making a ton of money. let's see what they say. >> we're going to watch. here's nick canon making his way to the floor and he'll join us
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in a moment. >> what does he think of apple? >> that's a good question. i bet he has an opinion on apple, actually. the guy runs his own media congromerate. >> hot and cold and blackberry was hot not that long ago. does howie mandel think apple is still hot? i would love to know. no, i'm not kidding. dr. pepper has not been hot lately. >> what does he think about apple? >> i want to know what do these people at radio city, are they into samsung. >> mandel and canon are making a trade. >> he's buyliingbuying. what is he buying? dupont? >> netnix. not down too badly to your point early. danger in reacting in the aftermarkt. >> because greenfield asked a question about -- >> down about 7%. that is around its lows yesterday. maybe a bit more.
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>> if international flips and turns positive or maybe they do some deal which breaks out international from domestic. reed hastings has a lot of cards up his sleeve and you keep trying to nail them down and he keeps coming back and saying, look. we'll make a lot of money. people say they have to pay more for content and they need us more than we need them. >> right. i was hoping we could take a look, jim, at gild which is up slightly today. but i want people to look at one year on glid and guess what the market value is? >> i don't know, $55 billion? >> $91 billion. >> no! >> no! >> that's unbelievable. well, that's -- >> by the way, larger than brist bristol myers, larger than a lot of pharma. >> if they have a cure for hepatitis c, it deserves to sell
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there. the stock has been a true winner. >> that was one of the deals that worked. >> hepatitis c has been -- remember bristol myers tried to tackle that disease and did not succe succeed. if gild has the cure for that. >> anigen has no growth. everyone trying to bid for onyx. >> not clear that everyone is the correct assumption there. we'll see. we'll probably hear something by labor day. >> it's the biggest gainer on the s&p. >> these stocks and private mortgage insurers and fha dropping out of that business and roll over the bad and coming of the good. the best in that play is right in that area is radian rdn. and then the second one is gnw. >> with that, 1697 just stone's
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throw from 1,700 on the s&p. let's get to bob and see what's moving on the floor. >> what we have been waiting for, the industrials to come in. honeywell, ge, dover, some of the other ones. johnson controls with strong numbers and getting the bulk of the rest of them this week and sort of a mixed bag. but jim's right on the aerospace front. you can't beat what is going on with united technologies. look at utx rising the lower end of its guidance. strong execution overall and commercial engine spare orders up 15%. that's organic. that's not acusitions. that's organic growth overall. aerospace division and commercial spare orders up 4%. that's pretty good. not just aerospace. otis, 23% up orders. this is elevators, this is not aerospace. climate controls and security.
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6%. organic growth. organic, not acusitions overall. you can't argue with aerospace rally. 264 versus 2.20. rarely that kind of big miss from the analysts on the upside. just doesn't happen that much. full year eps in revenue was raised overall, that was pretty terrific. didn't take, didn't stop, though, ceos from making promises. despite the fact that we had good earnings from lockheed and good earnings overall here from united technologies. most of the other companies flat revenues. they're all promising, three big companies promised it would get better in the second half of the year. utx. ongoing orders. this is the ceo well positioned for returned organic growth in the second half of the year. dupont ceo kullman said the same thing we expect second half earnings better and illinois tool works we continue to have
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confidence in our ability to meet profitability forecast. finally, david, a lot of questions where all the money has been going. huge outflows in bond funds in june but most money did not end up in stock funds it appears most money ended up in cash. we'll talk about that in the next hour because that represents a lot of money that could come into this market. still sitting new highs right now in all the major indices. david, back to you. >> thank you very much. revisit a couple stories we already visited from interviews on "squawk on the street." we got bad numbers from community health. community health has been considered the potential bidder for hma, a company that is for sale, but also perhaps even more importantly in the midst of something we very rarely see. glenview capital management to essentially take over or install an entirely new independent board of directors. eight nominees by glenview at
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this point. the likelihood of a deal for hma seems to have declined and declines rather marketably. hma is not interested in bidding and concern about the business to a certain extent and given community health and where it stands as a result of those numbers on friday. one would see the likelihood as a bid there being up to snuff as not as a much as it might have been before we got those numbers. when you factor all that in, you come back to the fact, it was july 18th and essentially means at any point get past 50.1% in terms of consent, they move in and replace all the directors of this company with their own and instead of trying to correct thought whey believe is failings in management and then perhaps then after a period of time, once again, engage in terms of a possible transaction. that does seem to be the more likely scenario. and the likelihood that you get
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a consent. we don't often see it. but in this case, it does appear to have increased because of the likelihood of a sale going down. let's move on to the deal we have today. we did mention it a bit. hey, man, if you have a ticker symbol fire, that should be bought. you should just buy that. i mean, come on, how could you pass up on that? if you did, you're probably happy a today. cisco $76 a share cash off aer or deal representing a 29% premium to yesterday's close. we're talking about, what? 25% premium to the all-time high. you always like to see that. values to transaction about $2.7 billion. of course, it's been improved and expected to close the second half of this year. looks like an enterprise value. the sale basis is 8 times. that's a pretty hefty multiple. in fact, even versus other deals in this sector. >> you did a great special on cybersecurity. does anything really work? i mean, these guys are -- you're
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just trying to one step ahead of -- >> it's a constant struggle in which you need to continue to one up whoever it is coming after you from shanghai or beijing or wherever else it is coming from. >> cisco feels -- >> i the stock is trading above the bid price. always perhaps in these kind of deals some hope that you get a three par situation. i don't know that that doesn't seem likely, but it is worth noting that we were through the bid. >> that's pretty interesting because nobody will outbid. >> we'rer wi er witbelow at 75.. >> not a great way to return. but our larger deal. >> excellent. let's shift to bonds in the dollar. go ahead, rick. >> thanks, jim. two-day chart really says it all. you know, we had a couple of sessions where we settle and we're about four basis points higher, but we really do seem to
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be in a range. albeit it a higher rate range than we were. open the chart up to one month and you can see what we're talking about. we talked about this many times. the bottom of the range seems to be in the mid-240s and we continue to bounce off of that level. look at boom yields and open them up to a couple months. their support level is around a 1.50 yield and they seem to be in consolidation moetd. you know, i think japan holds many secrets, but some of the aggressive tendencies of the market that really insighted our markets about a month ago certainly have eased back a bit. let's look at the jgb. you can see clearly we're below 80 basis points and this is something to pay attention to. while that's going on, we can see the foreign exchange side is in consolidation mode. very, very narrow range.
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open it up to many currencies, although more your ocentric. the dollar index. many say only two possibilities. either we're in a range from 82 to 83, which kind of fits with the previous charts or that double top is going to make it heavy and losing a bit of ground. that seems to be where the technicals are. but right now despite a lot of issues around the globe, seems like a summer session as it holds roughly a 12-basis point closing range. carl, back to you. >> thanks so much, rick, back to you. fresh from ringing the opening bell, we want to welcome nick canon host of "america's got talent" first live show tonight at radio city music hall here in the big apple. great to have you here. >> great to be here. >> did you have fun? >> i had had an amazing time. i heard we had the best bell ringing ever. i was screaming, get money. >> we see them all, that was a good one. you put it in order.
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>> yes, absolutely. >> we were talking about who you were buying on the phone. >> snapple. snapple. >> sponsor of "america's got talent." radio city, that's a venue. we were talking about that. >> the most historic venue in the world, honestly. that's where we're going live tonight for "america's got talent." it's exciting. >> four judges. l.b., heidi klum and howard stern. >> how is that fourth judge going to change the dynamic? >> they have to get through another person. so, i believe the talent is elevated because of that decision because a lot more people deliberating and now you know especially with a venue like radio city music hall, you can't have any slouches out there. it's going down. i see you guys laughing at me and all my antics on the show. >> you're a man who knows the current culture. we had net flex report last night. >> yes. >> what is your feeling on how
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netflix is doing with it original programming and the millennials. >> i think they're going the right direction. definitely the race between netflix becoming cable or premium cable and premium cable becoming netflix and i think right now that netflix is a little ahead of that race. a lot of people that are paying attention and watching content on their devices and in that on-demand type of way. so, i think the premium cable has got to step it up because netflix is on the verge. >> you run your own media company, incredible. you produce a lot of content. if you could have your choice of distribution, would netflix be it? you're talking anything. >> the idea that i'm glad that they are a choice. you know, i'm glad they're another option because that allows me to negotiate with the other buyers even more. >> by the way, a lot of content providers feel exactly that way. the more choices, the better. >> samsung, blackberry or apple?
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>> i'm going to go with samsung. >> that's what you have. >> i have a samsung and an apple as we speak. but i like the business of samsung a little better. >> two devices. >> it's all about choices. you guys know that. >> you better focus on two devices. >> although voted the most handsome man on tv or something -- >> he is quite handsome. >> so are you. >> thank you. >> i like particularly when you were swinging around. >> that's one thing david has not done on this show. >> boost the ratings. whatever works. >> overall, what should people look for this season? its eighth season, but your fifth season. >> my fifth season, eighth season. everyone is excited about radio city music hall. >> all the talent from the tristate area. >> well, we -- yeah, i didn't think about that. so, yeah, the idea of taking this show and other competition shows are going in the other
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direction, we're going north and our ratings are increasing and, you know, it's a family show 8 to 80, everyone loves this show. >> you have to watch it. it's water cooler talk every day about what happened on "america's got talent." >> seeing you tonight. say hi to mariah for us. >> i will. when we come back, should banks control power plants, warehouses and oil refineries? that's a question the senate committee is going to explore in a hearing set to begin in 15 minutes. a report live from capitol hill. the dow and the s&p new all-time highs this morning. we hit 15-6 not too long ago. look at what the market day may bring us in just a moment. ♪
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different ideas you're tossing around before the show. what did you settle? >> china. i think it's important we don't overlook what's happening there. caught my eye that a premier came out and said that he was
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going to draw a bottom line at growth at 7%. let's take a quick look at what's happening here. we are calling it the china pain trade because nobody is positioned for a china that can suddenly turn in an 8% quarter and that's what citi group says can catch people overnight. asian equities and shanghai composite and copper which yesterday was a bit up in anticipation of this. the reason i am calling it is two-fold. first of all, china is coming out out of the blue after sending the signal for the first half of the year that it was okay with the slowing economy. want to see rebalancing and now it's saying, we're going for growth. that's catching people on the wrong side of the trade and raising questions about the long-term implications of this strategy and how weak china's growth is now. plenty of people talking about outright deflation and whether the economy screeched to a halt in the second quarter. if they go the stimulus route now, what are they going to do? more fixed investment. already 48% of the economy.
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consumption has not increased as a share of gdp. fallen since last year. as we start to see people come back to the china trade, the whole commodity complex as a result. is it a short term gain at the expense of a longer term more viable strategy. >> the ponzi scheme continues. >> and i also worry tomorrow's caterpillar. some sense that the capital equipment market is picking up for them. look, i think drawing a line in the sand is a terrific thing. but you have to have europe to come back in order for them to sell product. >> a lot of people surprised they chose this moment to do it. >> thanks. we'll get 6 in 60 with jim after a break. what? customers didn't like it. so why do banks do it? hello? hello?! if your bank doesn't let you talk to a real person 24/7,
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what a day. a lot of information out there. start with yahoo!. >> you know someone would downgrade and i get that. >> this has been a remarkable stock. it's very expensive. this is a natural food play. >> couple restrictions. >> a company not so great ipo and inexpensive but they need to
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see earnings. >> hlf. >> this is one that is very controversial. this is carl icahn a lot of talk among hedge funds. they're just going to keep pressing him. >> hold or buy aerohughes. >> banks that has been strong. >> neutrals on noodles. >> noodles turned up to be expensive and people thought, wait a second, this one got too hot. keep an eye on chophouse asian kitchen. that is a chipotle rollout that i think has more pizzazz than noodles does, but only in a couple cities right now. >> we mentioned patty doyle on "mad." >> this is one of the great technology stories. we have to look for technology not where we think, which is our pc, cell phone or laptop. it is in tool companies and nick pinchuk did an incredible job.
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>> wow, what a show. >> we're creeping up on $16 trillion in s&p market cap as of n now. 15 the other day. >> simon is here with a look at what's coming up in ten. key meeting about to start ol hill about whether banks should be basically split from their commodities businesses. live from that. bring together the two hosts. yes, the hosts of the netflix conference call last night. that was interesting. also if you wait for apple tonight, look how concerned it should be about the launch. that and more in the second hour of "squawk on the street." i'm a careful investor.
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welcome back to "squawk on the street" road map begins with netflix. u.s. subscriber growth disappointing investors and we'll find out what reed hastings had to say in a cnbc exclusive. oil trades still higher. more gains to come? dennis will join us live. apple set to report third quarter results tonight, but should we be afraid of what google has up its sleeve? now to a cnbc exclusive. netflix second quarter earnings more than quadrupling, but
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didn't add as many u.s. subscribers as many hoped. all that pushing the stock into the red today. our own julia bo, rstin sat down after the call. what did he have to say? >> he brushed off the stocks after-hours decline and he would just point to how far netflix has come. here's what he had to say. >> always ups and down in the short term in the stock price but the big picture is great. a year ago we were at $80 and now we're over 250. five years ago we were at 30. feeling great about the long term. >> so, what does netflix look like over the long term as it faces increased competition from amazon and hulu. both spending on original and exclusive content. drive up netflix's prices. >> i don't think they'll steal subscribers because we have different content than they do.
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they'll do great work and we'll do great work. think of the political drama category. we have "house of cards" fantastic show but hulu has "battleground" which is quite interesting and good. amazon is funding one "alpha house" that looks quite promising. more shows is better and they don't steal from each other, they build on each other. >> how do you calculate the return on investment of other shows? >> same way with license show. what are the ratings of it and why do people love it? great content and the service. >> hastings addressed international expansion and launching the netherlands this quarter. he talked about the balance between gaining market share and being profitable. >> as soon as we're profitable in our current markets we will expand into more markets. as long as there is great growth opportunities for us and continue to expand, i think the right strategy for us is to keep
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moving forward and keep opening new countries. you know, it's only going to get more expensive to launch in a new country, not less expensive. we should do it as soon as we can. >> he wouldn't reveal which country netflix is launching in next, but pressure to extend more in 2014. more from my interview with hastings online. >> julia, a busy 24 hours. i think i saw you on worldwide exchange 2:00 a.m. your time. have you slept? >> not a lot of sleep. we have this great interview we have to get out there. all worthwhile. >> we appreciate your time turning that around. rich greenfield who also co-moderated the netflix call with julia. rich, good morning. first of all, before we get into some of the results here, your impression of being involved in a call of this nature, co-moderating with julia. how did you feel about that whole process? >> well, i think what was really interesting is if you looked at the three netflix executives
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that julia and i were interviewing, they were staring at the camera the entire time. no, someone whisperring in their ear and handing them sheets of paper. they weren't reading from talking points or even a script. it was totally unrehearsed. they had never seen the questions. julia and i made sure of that. this was totally fresh questions that we had gotten from investors and from other company executives. i think the lack of a rehearse nature and the fact that this was totally on the fly made it for a very, very interesting interview. i think the biggest criticism that we've gotten so far from talking to investors this morning, they wanted it to be 20 or 30 minutes longer. they wanted more of it, not less. >> rich, why were you chosen in particular for this role? >> you know, you'd have to ask reed hastings that. i don't know. i got an e-mail from him several weeks ago asking if we would participate and try to replicate what warren buffett has at his annual meeting and we were thrilled to be involved.
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>> netflix has tried to be innovative when it comes to earnings. do you think he tried to be a warren buffett 2.0. >> i think we tried to ask all sides of a whole host of issues and we were very inclusive of both sell side and buy side. i think the real issue that, you know, everyone has to focus on is almost every single earnings conference call that is done in the united states only includes questions from the cell side. netflix, even before last night's format pieby e-mailing questions you're able to get questions from investors who don't like to reveal their positions. that's very unique to netflix whether it was the prior format where they led it or this one where they had no involvement in what questions were chosen. complete discretion in what we asked and how we asked. >> sorry, carry on, julia. >> i was just going to say, simon, that i think netflix has been trying to innovate with a
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conference call format for a while. they eliminated the whole idea of having executives read a prepared statement, which takes up half an hour. they eliminated that years ago and analysts e-mail in questions or having them do a pure q and a format. the idea is to get away from the red statement and then limited q and a. >> simon, i think you also have to realize that most companies don't allow us to ask questions on their conference calls any more. sometimes they prevent certain voices that are too prabmatic for them. so, having this type of format where we're inclusive of a lot of questions. should get better questions. >> on the substance of where they are as a business at the moment, rich, still a polarizing company for many investors. rich tillo was on "squawk box" saying netflix is streaming
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media and everyone will get in the game and everything be held in the cloud. what did we learn from the conference call about the future of netflix? what additional add was there? >> one of the most amazing data points i was surprised about. still trying to understand how it is possible is that each one of their original series in the first seven days of viewing was watched more than the prior. even though they had a show with "arrested development" with built-in fan base orange is the new black which is a lyons gate seriesp seriespet. that show had more viewers in week one than "arrested development." viewers are starting to get the idea that you turn to netflix for new, hot, original series and you want to watch them because they're going to be pretty good. that's something that two years ago when netflix was licensing content like "cheer "cheers" an "wonder years" they have come a long way and the other
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interesting data point and why the stock is only down a little bit versus where it was after hours is the question that julia asked on the conference call related to margins and how they responded. people really thought that margins in q4 were going to be very weak and they are quite good. slowing down in terms of sequentially but the year-over-year growth is still very good. >> how do you answer the arguments that the subnumbers prove that those who got on to netflix for "house of cards" ended up ditching the service once the show was over. >> i asked a number of questions yesterday about churn. that is the number of people who sign up and drop the service. they did add more new subscribers in this past quarter than they did the prior quarters. that would indicate that the addition of regular content is working. after "house of cards" launched the company saw no indications that people who signed up to see it were dropping the service.
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so, they have dismissed that concern. >> well, yeah. it would be nice to see them bring that churn figure back, an important one. julia, thank you for your time. rich, as well, a busy 24 hours for you both. >> thanks for having us. a big move in dupont today. the stock up sharply. shares up better than 3%. were up almost 5% earlier on. nelson peltz revealing he is buying a big stake in the company. take a listen. >> i learned literally in the past two hours that you have just emassed and continuing to amass a very big stake in dupont. can you comment on that? >> andrew, you asked me in the greenroom about ten minutes ago. if you say dupont, what comes to mind? remember i told you, i said paint. >> dupont ceo ellen kullman said she has not spoken to peltz about the investment and dupont
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loves all of its investors. are those gains going to be short lived. later, another shot has been fired in the wireless wars. t mobile firing, again, at at&t. the new very snarky ad that is making some waves today when "squawk on the street" continues. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. wi drive a ford fusion. who is healthier, you or your car? i would say my car. probably the car. cause as you get older you start breaking down. i love my car. i want to take care of it.
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pulling back after seeing best gains in a year. crude also at a 52-week high. for his take on the market we bront to bring in dennis gartman. good morning. seems like forever, dennis, since we had you on the show. >> i've been on "fast money" a lot and they allowed me to come on this fine show. >> what is your take on gold? didn't i read that you have been ditching gold recently? >> well, no, not exactly, simon. i have been modestly bearish of gold until 3 1/2 weeks ago and then i wrote a water shed commentary. i got very lucky and actually the day of the low. i continue to be bullish of gold and i think gold's going higher. i'm not a gold bug. anybody that hears me knows i'm not a gold bug. gold is unothing more than another currency but i think in
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the circumstances that prevail, gold wants to go higher and broke up to the upside yesterday and i'm extremely bullish of gold in yen terms and especially bullish of gold in euro terms. quite bullish in gold. >> i'm interousing that you described gold a character. it wants to go higher. why do you think it will go several dollars higher? how can you calculate that? >> whether it's the fed or the bank of japan, whether it's the ecb or expanding reserves in the system. it's an old story and we know the story and not a new story but having its effect after a period of almost a year and a half of liquidation of the public out of their positions in plg primarily that has run its course and the effects of the monetary experience and being predicated into gold. so, i think gold wants to go higher and has been moving higher for the past several weeks and yesterday was a very impressive day when gold broke
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above 1307 and broke above 1315 and broke above 1315 and gap to the upside and given none of that back. i find that impressive. >> dennis, still a lot of talk a on the floor here about gold and crude oil. coming in light of the fact that you have seen regulators cracking down on the way banks handle and store and trade capacities. is there a link between the kinds of structures that we see across both of those markets about commodities in general? what is your take on what's going on here? >> kelly, i was raised in the cotton business 35 years ago and we were taught right from the beginning to watch what the term structure in any future's market does. when you move backwardation where the front month is above the back months, that's a market that tells you that demand for that commodity is strong and actually asking for that commodity to come out of storage. in the present environment with crude oil as backwardated as it
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is in back texas intermediate, take advantage of this and move the 700 million barrels of crude that it has in storage and sell it into the market and reduce and buy deferred futures contracts and a huge win/win for the united states and a huge win for the taxpayers. they won't do it, however. >> good luck. there's nothing here that doesn't pass the sniff test. as far as you are concerned, this is just a market dynamic that is as old as time? >> it does not bother me slightly. i do not believe a conspiracy out there to tighten supplies of gold, supplies of gold are simply tight or there's not a conspearancy to tighten the supplies of crude oil. demand is strong, even relative to the supply that we have. the economies of the world are strong and that's where you get it. so, i don't sniff anything un r
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untorrid here. let's move on. i think a lot of people waste a lot of time worrying about conspiracies where conspiracies don't exist. >> to this central point. we have a hearing about to start up on capitol hill as to whether banks should be allowed to control and store large parts of the commodity network, if you like. do you they are artificially boosting the price at the moment. a suggestion that they may have done it, on aluminum they might have done that. >> i read the article regarding goldman sachs and i'm not that concerned about that. what have they added? a tenth of a penny per can. which i guess over billions of cans is something, but do i really suspect that there is something untoward and evil tightening things and do i think it's evil for the banks to be allowed to trade in commodities?
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i welcome almost anybody to trade in anything because it creates liquidity when liquidity doesn't exist. the market is wise enough to take it out over time. can there be circumstances that for a short period of time, but over broad periods of time the market hammers things out. >> dennis, good to see you. come back any time. let's take you now to washington and to that powerful senate banking subcommittee, which is just about to start its hearing. it started its hearing on the big banks and commodity operations. live in washington with the latest. over to you. >> you're right that subcommittee hearing on the senate side of the capital has begun this morning and what you're seeing are witnesses who are testifying about various aspects of this question of whether or not the big banks should be allowed, as they have been, to push into physical commodity ownership and dealership. all this follows in the wake of "new york times" article that you were mentioning.
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over the weekend, the "new york times" raising questions about whether goldman sachs' ownership. in fact, artificially inflates the price of aluminum paid for by millions of consumers across the country. every time they pick up a can of coke or a can of beer, some people testifying on behalf of those industries who feel aggrieved about this process and say it's not fair. what you're not going to see at this hearing in the senate subcommittee banking anyone from goldman sachs which bore the brunt of that subcommittee, the "new york times" article that is being followed up here by the subcommittee. goldman sachs not sending anybody to testify up on capitol hill. i talked to a person familiar with the opaerations of this company in question, the warehouse, the aluminum warehouse company who said earlier today to me on the phone that, in fact, there's nothing wrong here because what's going on is it's a free market overall and these companies have the option to buy their aluminum
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from anyone they want to. defending very much this process of moving the aluminum around in a cycle of warehouses. but some of the stuff that the "new york times" exposed over the weekend will come up in this hearing today and we'll keep an eye on it for you. apaal and google having very different years. google gaining 30% while apaal is down by 20%. time for apple to fear what google is now bringing to the table? we'll get into that next. find out why steve cohen's lawyers are calling the allegations against him baseless. we'll be right back. [ male announcer ] come to the golden opportunity sales event
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the government's case against him. kala has details on that. >> part of the lengthy defense the lawyers issued to employees yesterday against the sac's claim that steve cohen missed red flags and defended the first questionable trade which were selling and shorting elan and a run up in the stocks and expected downside. above all that, it took a loss, not a profit. the, sec says they gained big on a tip of the outcome. it involves dell and an inside tip that cohen received before he sold shares. the e-mail reads in part, "i have a second-hand read from somebody at the company and seeing gross margins missed by 50 to 80 basis points. please keep to yourself as obviously not well known." cohen would not have read that e-mail because he only reads 11% of the 20,000 e-mails he gelts
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each month and a trading would have been physically impossible. when the e-mail was forwarded to cohen he was on a call with the manager chief. cohen began selling that position. and a minute after the previous call ended he pent spent a minute on the phone with a research trader and he executed a sale from his own portfolio. no time for him to have seen the e-mail during that sequence of events. but what was discussed on that one-minute phone call with the research trader? lawyers say no one will testify and the trader discussed the second-hand read e-mail with cohen and testified he doesn't remember it. counter the sec's claim but, surely, guys, not the last in this case. >> one of the more interesting defenses we've seen there, kayla. thanks veryple struggles, googl rea ready to release a new device.
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here are the stories we're squawking about at 7:28 on the west coast, 10:28 here on wall street. dow component united technologies rising to new all-time highs. the home of jet engines and otis elevators posting better than expected second-quarter earnings and raising the lower end of its yearly forecast. on the flipside, travelers is the biggest loser on the dow this morning falling more than 2.5 despite a second quarter earnings beat. a revenue miss and a decline in customers at its consumer unit. and shares of hershey few record highs. citi is adding the chocolatemaker to its top pick listing. we focus, of course, on the great battle still making place.
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a spectator plus participator is dan loeb. victory lap on yahoo!. still owns roughly 20 million shares of yahoo!. nonetheless, this morning loeb getting attention on herbalife. he had a long position and did exit that with a nice profit, of course. but there is continued questions about how much and how quickly and how badly can mr. acman be squeezed particularly in light of this possibility that herbalife take repurchase of shares. so, a bloomberg messaging header. sends you a message on bloomburg has gotten some notice this morning. i tweeted this a couple hours ago. 2 1/2 hours ago. it is worth mentioning, again. loeb, who has always been outspoken and fancies himself, somewhat witty says new product. the herbal dch ife enema
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administered by uncle carl. nonetheless, it goes back to this idea loeb and his an tiffatif how much stock has been adding up sharply over the last couple weeks and the position has to be hurting just a bit as you watch it approach $36 a share. >> you're one of david's 37,000 followers. you got this news before it went viral this morning, david. >> a lot of people are not following. >> they are not aware you sent it out in the first place. >> certainly, herbalife a battleground stock between mr. icahn and mr. loeb on the sideline throwing spitballs.
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>> that's a visual. thanks, david. good stuff. meantime, john boehner finishing up a speech on the economic agenda. john is here with some of those highlights. >> morning, carl. the president is trying to reframe the economic debate in advance of the fall battles on spending and government shutdown and debt limit and all things that are potentially problematic. and john boehner, the house speaker, tried to get out in front of those speeches which you'll continue all through the summer with a press conference this morning which he said the president returning to the economy is coming right back on republican turf. here's the speaker. >> the president said he's going to go out and pivot back to jobs. well, welcome to the conversation, mr. president. we've never left it. we have been focused on jobs for the last two and a half years. actually, longer than that. the two and a half years we have been a majority. if the president was serious about helping our economy, he wouldn't give another speech. he would reach out and work with us. >> of course, the problem is that the prescriptions that
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republicans in congress want for the economy are pretty much the opposite of what the president wants. he wants more government role in education and in job training and skills development and so how the two sides can fit those two competing agendas together this fall is significant. but part of what the president is doing with these speeches, carl, is playing the long game. not just for what he can accomplish this year, but how he can influence the conversation inside and outside of washington going forward. >> yeah, we're going to be listening to some of these speeches for a while, john. thanks so much. john harwood in washington. meantime, detroroid fans. completely assembled in the u.s. and users will be able to customize the hardware. is this the boost that google needs. spencer is the deputy bureau chief and jonathan gellar editor in chief. good morning to you both. >> morning. >> to some degree you argued
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this is google's attempt to justify the purchase of motorola and put it on the map in a smartphone way. is it going to work? >> we don't know. motorola hasn't been the one to make a product that people have lusted for. never been able to replicate the samsung model. with google, it is interesting because they have revamped their whole supply chain. they're mafring this in the u.s. they are spending $500 million in marketing it. at the end of the day, if google can't do it. i don't know what to say about the android ecosystem. >> spencer, $500 million to markt a phone is a lot of money. but big examples where big companies had a lot of marketing power and it just didn't work. >> yeah, you know, the smartphone market is driven by two things. i would say great products and huge marketing. you see that with samsung and with apple and the issue with google, i think, obviously, google is a great company. its expertise is really in
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software and trying to make this difficult transition to becoming a hardware company and it's proving challenging. so, this motorola x-phone is their first big sort of coming out party to prove that they can really hit the ball out of the park with hardware. and, you know, the marketing will help. samsung spent $400 million on marketing their mobile devices in the u.s. google could outspend samsang. google could outspend samsang marketing this device, potentially. >> outspanding apaal on marketing in the u.s. let's talk about apple tonight and the quarters to come. what do you think the real story is going to be regarding new products. is this low priced iphone the best we're going to get for 2013? >> well, you know, it appears that way. no one really knows. apple is tight lipped about its product pipeline. the big issue with apple, the larger issue is growth. the company is expected to see
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flat revenues this quarter and earnings are supposed to decline. so, the cheaper smartphone could be a big answer to that problem because apple is exposed in emerging markets. they have this single model strategy where it is a very premium price iphone, smartphone and it's done well in developed markets. but growth is slowing in developed markets and more of the growth is coming from emerging markets where samsung has a broad product lineup and they could address different price points. so, i think for apple they need to address the lower price sector of the market and they also need to come up with some game-changing products. >> apple this fall, apparently, could come up with fingerprint i.d. and then the cheaper, more colorful product, as well. but it looks like this google phone, potentially could take all those boxes before apple even launches its own devices. does it need to? >> i'd say, no.
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i think they are going to be very different devices. i think that google, the motorola x is going to be more of a customizable device. something that people really haven't done and maybe you can pick colors and screen sizes and components and things like that. it will appeal to probably a more consumer oriented demographic of the android group, let's say. people who really don't want that geeky, geeky phone. i think as far as a apple is concerned, just to add on to what spencer was saying, i don't think they're going to be making a low-cost iphone. if apple does do something, it is probably going to be in the $350 to $400 price point. so, more of a mid-range phone i think we'll see from them. jonathan, isn't the pricing potentially very, very dangerous for apple here? google doesn't really need to make a high margin on its new fl flagship, it could arguably sell it at effectively a discount within the industry and, therefore, grab critical mass
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particularly against the carriers, potentially. couldn't it? >> they did it with the nexus 4, which was one of their flapship phones that they made with lg and subsidized that around $300 or $400 per handset. they were selling that fully unsubsidized for $299. that's a great point. i don't think they'll go that far wp the moto x they need the support and my guess $199 and also to the apple point, yes, you're right. if they keep lowering the price and the margens come down that's a problem. the thing we have to remember about apple, they have such scale and when they're making a phone less in terms of cost, they're make it up in terms of volume. they could sell two, three, four times as much, that's a net positive for apple. >> you have the point about scale, absolutely right. we'll see what the numbers bring this afternoon. thanks for your time. up next, the latest on the southwest 737 that crash landed
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new york laguardia airport getting back to usual after following the southwest airlines 737 landing incident yesterday. phil lebeau joins us with the latest. what do we know now? >> we don't know more at this point. investigators are still trying to determine what happened. have you seen this footage? take a look at this amateur footage of the southwest plane as it's coming in to land. the nose gear, the landing gear collapses and there you see it skidding to a stop on the runway at laguardia. the southwest flight happened about 5:35, 5:45 eastern time
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yesterday. the pilot gave no warning of a problem with the landing gear. here's what some of the people onboard felt. >> to me, it was like getting smashed in a car wreck. >> everyone is just a little nervous and freaked out. understandably so. i feel like all in all, everyone aboard handled it amazingly. >> we walked away, no fire, no death. >> that's the bottom line. no fire, no death. 150 passengers onboard and eight suffered minor injuries. laguardia expects or they have reopened that second runway, but the delays. they're going to filter throughout the day. earlier this morning, it was two-hour delays at laguardia. southwest and boeing are both looking into what exactly happened with that landing gear and pull that plane aside and look at the landing gear and figure why it collapsed without any warning. you look at a shares of southwest, usually not a residual effect on an airplane crash like this or a crash landing, we should say, on the stocks of the airlines. especially one where there is no major injuries or death. also, take a look at shares of
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boeing. we show you the one-month here and we talk about the impact that these types of hard landings. look at the month that boeing has had, guys. remember, we had asiana 214 which was a 777 and fire in london on an 787. and yesterday with a hard landing at laguardia and, yet, that stock is just a few ticks from hitting an all-time high. guys, back to you. >> that's amazing, phil. i'm curious. after going accident free for so long, phil. the jex uxtaposition of this flight, do you chalk it up to coincidence? >> i do chalk it up to coincidence primarily because nothing that links all of these. keep in mind, we're seeing more traffic worldwide when it comes to commercial airplanes. we're due for some of these. i hate to say that. but the law of averages are there that you're going to have more of these types of incidents, but overall we are below last year's rate in terms of fatalities worldwide when it
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comes to airport crashes. >> that's important to note. these things get so much attention. netflix, meantime, more than doubling so far this year but falling after the results last night. still a reason to invest in the stock. a bull and bear ready to battle it out, when we come back. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪
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let's get to the cme group in salt lake. rick santelli with the santelli exchange. >> good morning, carl. we had a fabulous guest on "squawk box." wilbur ross on and he had soothing words for china. i'll tell you what, on this trading floor a variety of topics that everybody buzzes about, especially during some of the dog days of summer when the market volumes drop a bit. in china, one of the top three on the list, of course, the other one is taper, but they both seem to be on the same lane of the highway. and i'll tell you why. first of all, let's start with
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chinese premier li keqiang and they call him mr. li. some of the issues and thoughts about the economy and how much they're growing have been written about by the ft over a series of articles the last couple of days. i think what's most noteworthy is in a past life before he is a chinese premier, he was known to ignore many of the governments' statistics. mr. li had something called the li index. and evans ambrose who has written these several artaica i talked about it being created by using three variables. one, electricity usage. the second was rails. how much service went on the rails and the third one was credit growth.
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and why are these important? i'll tell you why. because many have now tried to re-create the li index. a week ago, the 23rd, today is the 23rd. i think it was the 13th or 14th. a week ago, the 23rd -- today is the 23rd. i think it was the 14th, 13th or 14th, we learned that chinese gdp was 7.5. but according to the li index using these variables, it seems as though you could make an argument it's closer to 2%. now, why is this important? because like our own version of the taper, it seems as though the chinese have blinked a bit. by bumping huge money into infrastructure and credit, they were keeping things going, but the return they were getting on this, think the purchases by the fed, they were getting less and less out of their programs. so they tried to curtail. but curtailing isn't easy these days and many countries are going to refrain from such let's
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call it austerity although that word austerity, especially with what's going on in detroit may be overly used or misused, but in the end i really do think that china's growth is below the advertised right as mr. li has talked about in the past, but what the markets are going to have to grapple with and commodities might be the way to try to find the value in the chinese economy, we're going to have to try to figure it out the old-fashioned way, by trading and price discovery. carl and the gang, back to you. >> all right. thanks very much, mr. santelli. well, t-mobile is on the attack again in a full-page ad in "usa today" the carrier attacks at&t new upgrade plan saying, quote, we wouldn't call it deceptive exactly. earlier this month they introduced their jump program allowing customers to upgrade twice a year with a fee. both at&t and verizon introduced
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programs of their own. at&t set to report after the bell today. this is interesting for a number of reasons, one of which is you're starting to see a higher level of competition in the wireless industry. t-mobile is healthier now it's merged with pts. nonetheless, they are spending money to compete. they seem to be gathering subscribers. sprint has a new landlord. softbank controls 80% and there's a plan to spend a great deal of money there. then you have verizon last week increasing its capital expenditures beyond what had been anticipated. at&t, we'll find out what its cap x plans are if they've changed at all after the bell. certainly, a lot of competition in wireless. why else is that of importance? well, to those who might make the argument you really need three main players, not four, in order for there to be full competition, if you see this
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kind of competition with four, the u.s. government might not be as willing to allow some more consolidation. perhaps between a sprint and a t-mobile as has often been rumored. >> yes. we know they're scrappy, right? they're scrappy, but it's weird to think of what's going on between these two and how they might have been one in a different world. >> without a doubt. without a doubt, exactly. u.s. government, of course, thought otherwise. we know sprint and t-mobile have also talked about it. nothing says that that deal won't happen down the road. but they are being more aggressive. >> and i don't think they're the only ones. remember when was it google that went after microsoft -- no microsoft went after google for g mail saying it was snooping on you. i think u.s. ads are getting more aggressive despite the bright pink. >> i think they're trying to say their upgrade plan is cheaper, you can save $50 a month and don't get lost in the small print. >> i bet the general counsels go over these with a fine tooth comb looking for signs of libel
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before they publish, right? >> i would imagine that's the case. >> lawyered to the gills. >> up next, how one couple got their hands on this piece of james bond history and it's about to make millions for them. we'll have the details after the break. definitely worth the wai. ♪ summer's best event from cadillac. let summer try and pass you by. lease this cadillac srx for around $369 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. bjorn earns unlimited rewards for his small business. take these bags to room 12 please. [ garth ] bjorn's small business earns double miles on every purchase every day. produce delivery. [ bjorn ] just put it on my spark card. [ garth ] why settle for less? ahh, oh! [ garth ] great businesses deserve unlimited rewards. here's your wake up call. [ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose double miles
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one of the most famous bond cars after, the submarine lotus from "the spy who loved me" is heading to auction this fall. the real story is how the car was discovered. robert frank is here at post 9 with that incredible story. >> it was one of "q's" greatest inventio inventions. here is the big scene. >> now, of course, after the movie the modified lotus mysteriously vanished. in 1989 a long island mon who rented tools for a living bought a storage container sight unseen. he paid $100 for what at first appeared to be just a large lump covered in blankets. when he unwrapped it the next day, he still didn't know what it was because he had never seen
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a james bond movie. it was only after he loaded it on his truck and strangers stopped him on the way home, they told him it was a bond car. years later doug, the head of the ian fleming foundation, verified the authenticity and told him what it was worth. it's expected to sell for $1 million and probably even more and it's likely to change the humble life of this owner. >> first of all, you're going to go down in history as a guy who found the james bond car, but then if it sells for what we're hoping it will sell for, that money will give you an opportunity to live very comfortably for the rest of your life. >> this car is going to be sold by rm auctions in london on september 9th, and that owner, that blue collar guy from long island, will be there to see the price. >> what do they think it will be? >> at least a million. the last big james bond car was a db-5.
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big war between people. i go for the lotus. i love this car. that car went for $4.6 million in 2010. this car, which is a working submarine, could fetch even more. >> it's a working submarine? >> how did it end up in this storage facility and who stopped paying a bill so that they took it back and put it up for auction? >> remember the movie was 1977. they found the car in 1989. they were paying the bills for ten years. they think it was mgm or whichever movie studio owned the car. maybe a staff shuffle, they stopped paying the bill. >> is it quite rusty? >> no, they fixed it up. >> it spent a lot of time under water and the cars used to really rust in those days. >> but it's a submarine. >> what about tax implications. >> for this guy? >> look, he's going to have to pay taxes on it. he comes away -- if it sells for $2 million, he comes away with
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$1 million or more. this will change his life. he rented tools for a living and he'd never even seen a james bond movie. imagine there are people out there in the 1980s still had never seen -- >> it he takes you on a ride, you have to bring us, all of us. >> it's a deal. got to bring your scuba gear though because you can't breathe inside the car. >> nice. thank you, robert. the incomparable robert frank. here is what you missed earlier on. >> welcome to "squawk on the street." here is what's happened so far. >> it's a cyclical and volatile segment for us, and it's about gdp growth overall. so that's the segment that's undergoing strategic review of strategic alternatives. >> it's not direct competition. people watch shows from both us, and hulu and amazon. by the way, the one with the most content is cable and satellite, and they're continuing to get watched. >> these dow stocks, i don't
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know. journal said yesterday companies aren't doing that well. i guess i should defer. i refuse to. >> you refuse to. >> you maintain this is a good earnings season. >> yes. >> so you want shrinkage. >> what is the symbol for that? >> great to be here. >> did you have some fun on the balco balcony? >> i heard we had the best bell ring ever. i was screaming get machine for everyone. >> one of the most amazing data points i was surprised about, still trying to understand how it's possible, is that each one of their original series in the first seven days of viewing was watched more than the prior. >> for apple they need to address the lower price sector of the market and they also need to come up with some new game-changing products.
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>> live at post 9 of the new york stock exchange. get a check on the markets as the dow has been slowly losing its gains. we hit 15,600. that was a record high. currently riding the flat line. nasdaq is negative. united technologies has seen a nice burch as the company beat expectations although revenue short of forecast. saying it's well-positioned for a return to organic growth in the second half of the year. shares of utx at an all-time high. lockheed martin profit rising. the stock the highest since september of 2008. they cautioned on sales for the rest of the year. >> that take us to our road map for this hour. first, it's the earnings report you have been waiting for. apple reporting after the bell today. we'll tell you what you need to know after that big report. disappointing subscriber numbers
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hurting netflix. we'll debate if should be buying or selling. plus, no more toys with your taco. taco bell is axing its kids' meal. first up, all eyes on ap until a few hours with the former investor darling set to report after the bell. joining us to break it down, what to expect, keith bachmann with a $480 price target. good morning to both of you. >> good morning. >> keith, i think it was your note earlier in the week that suggested the difference between their guidance and consensus could actually be narrower than in previous quarters. so maybe we're not due for some blowout surprise. explain your thinking. >> yeah. first of all in the quarter i think it's going to be a very strong quarter. we're about a billion dollars higher than the street, and we think eps and gross margins will likewise be above the street relative to what i think is going to turn out to be very conservative guidance.
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so as we look at guidance, our thought is apple will guide revenues roughly flat sequentially and it will be about $1.5 billion below where the current street raevenue targets are. it sounds like a lot but relative to the last few quarters, we think the variance to guidance will actually be smaller than past quarters. i would expect the stock to move a little higher off this report. >> but not enough for you to get off of your market perform, right? >> no, not right now. the most important thing for apple is a long-term gross margin trend and while i think this quarter is going to be a very good start, we're really not going to know where the gross margins are going to shake out likely until the december-march quarters with a full quarter of new phones and new products. our view is the industry is coming under more competition here and apple has about 9% market share in hand sets and about 65% of the profits.
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longer term gross margin trends are something we need to watch carefully. >> would you agree? is it all about gross margins? what are you going to be watching? >> absolutely. long-term gross margins will be an issue. basically if you look at the product mix, the product mix is moving toward products with lower margin. the low end ipad is doing better and we think they're going to launch a cheaper iphone that's going to be an issue on the margins. i agree with keith that there's going to be pressure on margins, but at the same time for the next quarter, i think the guidance could be a little better than indicated. the biggest would be the launch timing. >> what takes you to the $550 price target? what's the catalyst and what's an important part of their quarter to make that story be the case? >> i think it's the iphone
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numbers. to hit that $550 target the big thing is what they will do with the new products. we're expecting them to launch new categories early next year. they have been talking about iwatch and also for next year we're having a larger screen iphone to come from them. all those things should be -- should drive a bigger upgrade sickle and that's what would get us to our $550 price target. >> finally, keith, i mean, we still -- we used to talk about their cash hoard all the time, not as much. are we done sort of looking out for div hikes, big purchases? are those off the table for now? >> i don't think so. i think apple did a very positive thing last quarter in much greater distribution of capital. i would expect the pace to be much more gradual from here, particularly on dividend hikes and those things. i wouldn't expect any change this quarter but over the next year and change i would expect
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gradual increases to dividend buyback levels but i would not expect anything tonight. thank you very much. >> thank you very much. cheers. >> let's get over to see ma mody at the mass zach. >> ubs analyst telling me that broad com shares may be moving lower in response to texas instruments announcement last night that it's licensing wits wireless connectivity business to a customer. they did not unveil who this customer was but the market is speculating that this customer may be apple. keep in mind broad com is a chip supplier to apple and broad com does report earnings tonight. they a you can see the stock down 5% on the day. >> thanks for that. it would certainly explain some of the move there. a big move in shares of dupont today. that stock up sharply after the company reported second quarter
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results. we're now seeing it pull back, only up about 0.7%. dupont's chief joining squawk box earlier this morning. here is what she had to say. >> its volumes were up sequentially and year-over-year but the prices are well off last year's mark. it's a cyclical and volatile segment for us. it's about gdp growth overall. that's a segment that's undergoing review of strategic alternatives. >> coleman saying the company has been working on transforming dupont but she was tight-lipped about nelson peltz investment in her company saying she hasn't spoken with him. >> let's send it over to josh lipton. >> carl, we know cisco is acquiring source fire for some $2.7 billion in cash. fire up sharply on that headline. analysts at bmo saying they are positive on the acquisition as it is accretive to growth and gross martins. we're also seeing other names
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moving in sympathy, including palo alto networks moving higher. carl, back to you. >> thanks so much for that. a bit of a disappointing quarter for netflix. sub growth coming in lower than expected. we'll talk to a bull and a bear. first, rick santelli watching the state of the global economy. >> and it really is the big topic. we're going to continue to discuss the li index, what i was talking about regarding china and their true growth rate. we're going to talk about ben, the taper, and, of course, car sales but not necessarily the strong ones in the u.s. maybe the weaker ones in europe, and you know who we're going to talk about it with? ira harris. ten minutes.
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talking about regarding china
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welcome back. we're watching shares of netflix this morning under pressure. down 4%. after the number of subscribers added last yaur was short of expectations. julia boorstin spoke to the ceo yesterday and asked him about the growing competition. >> i don't think they'll steal subscribers because we have different content than they do. i think what will happen is they'll do great work and they will do great work. we have house of cards, fantastic show but hulu has an original show called battleground which is quite interesting and good. amazon is funding one. alpha house, which on goodman that looks quite promising. i think more shows is better. they don't steal from each other, they build on each other.
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>> markm ahaney is with rbc, raising his target to $280 from $250. allen gold joining us as well joining his target to $150 from $120 but maintaining an underweight on netflix. good morning. we've got your territory staked here. i wanted to ask you, were you surprised to hear reed hastings almost promoting the offerings from his competition there? >> not at all. he has done that in all the prior calls. he's talking about the benefit of internet tv. >> is that the case because it looks as though they're having a trickier time adding subscribers. >> i think the sub number was good. it's just that the stock was priced for perfection. sub numbers hit the streets' consensus number. maybe it was a little below the whisper numbers but the sub numbers did not beat expectations. with the stock at $260, they almost had to beat for the stock to continue increasing.
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>> so, mark, why at $250 is the stock not too expensive? why do you think it can hit $280. >> we had an expectations corrections. the ba leach a video webcast would guarantee big upside. expectations got a little out of hand but we'll base the stock and go higher. this company is going to do about $8 in earnings, u.s. earnings, next year and then you have this international business that they'll have to take from loss to break even mode but we think they will now that they have a base of 8 million subs there. secondly, these original content series, they have done something that the market underappreciates. they are giving people a reason to stick with the service they never had, this original content on the site. it will work through the model and stock should go higher. >> 24 lonthis long-term target 60 to 90 domestic subs, is that still in the cards? >> it seems aggressive. i raised my target to 51 million
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subs, that's over half the broadband households. i realize netflix you don't str have to buy through a basic tier. it's only $8, probably going to $9 in a year or so, but i think to have over half the homes when it's so easy to churn out continuing to have it seems quite aggressive. >> mark, it does seem as though the shares are reacting more to the subscriber count figure than its earnings power. >> that's right. the single biggest factor will continue to be the subs numbers. if the subs grow, the margins will rise. they're inextricably linked. the more subs, the more revenue they get with which to buy more content, the better margins expand. >> the reason i make that point is jur saying your $280 target is justified in part that they could earn $8 in the u.s. next year. while that may be the case, the shares instead focusing on the subscriber account number which may not be able to get to the
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level that is reed has talked about. >> perhaps not. it's very hard to tell. they're going to add though approximately 5.5 million subs which is more than they did last year oge a bigger base. that's impressive. we think they can continue to add another 5 million lstnext y. this is becoming one of the three reasons why people buy tablets in order to watch video and netflix is a major beneficiary of that trend so the end market is bigger i think than just the broadband household. >> finally, allen, international, they faced questions last night about when some of these markets turn break even, but are you more interested in watching domestic sub growth or watching some of the international things make money? >> i'm focusing more on the domestic. we have a 9.50 domestic earnings out in five years. i certainly wouldn't give a multiple on the domestic dvd
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business. also i'd say content costs have to go up as the subs are going up. to the best of our knowledge, the big disney contract actually does have a step up if netflix hits a certain number of subs. it's not quite as fixed in my opinion as mark is saying. >> interesting point. >> all right, guys. thank you both for thoughts there. mark and allen, this morning. >> got some breaking news on ford. phil lebeau has more on that. >> a busy day, carl. this is good news for the people in detroit looking for more jobs to be added in that area. ford announcing it will be hiring 800 white collared workers, salaried workers. most of them will be positioned at the company headquarters in dearborn, michigan. they're launching a recruiting campaign focused primarily on social media like facebook and twitter. ford trying to reach those people who historically might not think about working for an automaker. they are expanding their
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development work in michigan. they're going to be focusing on next generation technologies. i get this question a lot from people. they say how much has ford shrunk and then grown under ceo alan mulally. you go back to 2006 and this was really a floated company. 264,000 employees worldwide. they shed brands, they shut down brands. shrunk down to 158,000 in 2009, but since then they're up 10.7% standing at 175,000 employees. don't forget, ford is going to be posting its second quarter earnings tomorrow morning, and, guys, a big part of that will be the growth in north america. look for huge numbers when it comes to profitability here in north america. something like $2.3 billion expected, and we're also going to be talking with cfo bob shanks. he's going to be a guest of ours first on cnbc on the "fast money halftime report." that's all tomorrow, so a big day for ford as we wait for the earnings tomorrow. guys, back to you. >> phil, sorry if i missed it, did you say are these jobs going to be in detroit or is this just
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somewhere in michigan? >> primarily at dearborn at the headquarters, so in the detroit area, and i get this question a lot. people say are the problems with the city of detroit, the bankruptcy, going to hurt ford and the other automakers in terms of recruiting talent? most people say probably not. those companies are so strong in the pool of talent is so great, they should be okay. they shouldn't be suffering a hangover effect, if you will, because of the problems in the city of detroit. >> i was actually wondering the other way around. if there's something here that ford could do for the city of detroit. >> well, i think ford would answer we do a lot for the city of detroit but they've always been based in dearborn. it's not like they're going to move right downtown. dearborn has been their home from the beginning. i think their answer is we do something for the greater detroit area. >> great point.
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phil lebeau with the news on ford. again, ahead of their earnings report. thanks very much. >> between boeing and ford, you will be busy tomorrow, phil. thanks. this story just getting bigger. congress now investigating reports that goldman and other banks are manipulating aluminum prices mag making every can you buy more expensive. we'll bring you the latest details in a few moments. ♪ honey, is he too into this car thing? [ mumbling ] definitely the quattro. ♪ honey? huh? a5. what? [ sighs ] did you say something? ♪ [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t
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welcome back to "squawk on the street" and welcome ira harris. all right. it's tuesday. do you know where your money is? all right. let's start with china. i'll tell you what, you know, some these telegraph pieces, these ft pieces, it seems i'm read being a different china than i hear most of the guests other than mr. chanos talk about on our air. there's some serious questions. it doesn't mean it's going to have a hiccup that we're going to have to deal with imminently, but it certainly seems as though we're all going to be looking for waldo except for waldo isn't who we're really looking for. we're looking for growth. your thoughts? >> you know, again, my view and we've talked about this, i've never been a believer -- a believerer in the china story certainly but the data that comes out on a regular basis i've never put any credence to
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and i can't believe everybody else does. here is a country that again wouldn't allow google. if you don't allow google and the free transfer of some information i'm going to be suspect because everything is a top down and they give it to us top down. yes, i read the ambrose pritchard cheese -- >> he's terrific and i apologize because i think i mentionedf t. he writes for the telegraph. there's been one after another. what do you think the real growth rate. is the li index says 2%. public conception 7.5%. do you think it's somewhere in the middle or do you think the li index is pretty good. >> i can't say that's good because it's just one more measure. how do you measure this stuff in a country that's so vast and really is just starting to come on in regards. it's not like they've caught up to the united states in terms of technology. >> maybe we could be showing a 20-year chart of the dollar. what do you think is going on there? >> there's a battle -- the yuan
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was devalued on january 1st, 1994. >> the far left of that chart that may or may not be up there. >> it was 5.8 to 8.7. interestingly on a day that nafta began. so the chinese knew what was going on and where it was directed. this has always been about trade and the chinese model was really like the japanese model which was let's create as much export oriented growth. i believe under li they are going to try to make this transition to a much more domestically based economy, but this is a difficult transition. >> it could take generations with an "s." >> i believe that they're really going to push for this, but it's going to take a lot. but i think the yuan will tell us a different story because then they'll let the currency appreciate more. if you're domestically based by definition you will be imported a lot more goods. >> it seems to be exactly what's going on. let's stick with trade and open it up a bit. real quickly. over 6.4%, 6.5% down year over year. tie that up for me.
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>> europe a struggling. i know the barrons piece. i don't buy it. unless you're unemployment rates are being fabricated to the high side which i don't see -- >> 12.2 currently. >> with that especially comes nonperforming loans. there's a lot of problems. so everybody wants -- >> and you bring up a great piece. while we're all talking, we can't pull in the stimulus, can't pull in the taper, everybody is blinking. all the reforms back three, four, five years ago when we embarked on all this, none of those have been done. >> nothing. and draghi has gotten -- >> we have to go. let's talk about reform next time you're on. hey, gang, kelly, back to you. >> thank you, rick. the pain trade for china, we have been talking about it all morning and you don't have to go home but you can't play here. taco bell announcing it will drop kids' meals and toys at all of its restaurants in the u.s. the company's ceo says kids' meals account for less than 1% of taco bells overall sales and
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don't fit in with its strategy. he says, quote, the future of taco bell is not about kids meals. this is about positioning the brand for millennials. >> huge issue for quick service in general. people talk about mcdonald's having a millennial problem. clearly taco bell saying we're not even going to try. >> whatever happened with toys and happy meals. someone said what about -- the movie -- those little guys. >> the minions. gee said i went into mcdonald's to get a happy meal with minions. >> had to go six times to get the purple one. i know your pain. >> the taco bells of the world, you have to wonder if mcdonald's is next. >> staying with fast food, make sure you tune into "power lunch." emilb rolick will be live. wendy's on a roll. >> the senate meeting right now
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on reports goldman sachs and other banks are inflating the price of aluminum driving up the cost of every can you buy. we'll bring you the latest details in a moment. plus the bells are about to sound across europe. just a couple minutes left. we'll get you details on the close and it means for us back home. ♪ this is the pursuit of perfection. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before.
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the european markets are closing now. >> you know what that sound means. market have closed across yurp. simon, it seems like spain in particular in focus today.
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>> spain is having a good day. dare we suggest that europe is beginning to bottom out? probably not, but the spanish data today is good. the bank of spain saying that actually the contraction was just a tenth of 1% in the second quarter. consumer confidence is also at a two-year high within the eurozo eurozone, albeit at a minus 17.4. as far as the corporate data is concerned today, the stand out, the stand out is the moves that you're getting in telekonls. looks like the european union may be reframing the regulatory environment so the pan european players rather than just concentrating on individual markets and, therefore, a lot of cross border deals look to be under way. telefonica is paying to take over the dutch. these guys in france will start sharing their networks.
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viv vendy has sold one of its operations in north africa. across europe, telecoms seem to be rallying. portugal telecom across the board really some interest in m&a finally in europe. basic materials have had a good day today partly because the chinese have said we won't let growth fall below 7% and at the same time there's some talk that they would use railway projects to mop up additional or sus plus construction materials that they have in china. those guys have done well. of course, the big story coming out of london, everybody waiting for the first glance of the new prince in the wake of its a boy being born yesterday. certainly kate middleton's parents attended today. for my money the outpouring of interest is really testament to the fact that the younger royals, william and harry, have really managed to reboot the
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british monarchy. 16, 17 years ago after the death of eye diana we were having an open conversation about whether the monarchy would survive in the united kingdom in its present form and they have clearly, clearly enjoured that that happens. a huge outpouring of emotion and the suggestion retail sales could be $370 million higher as a result of the birth baby. a lot of that probably spent on alcohol. >> ihs had a similar report. a little more booze being sold as a result. cheers. >> cheers, carl. >> thanks, simon. let's get a check on energy and commodities as well. sharon epperson at the nymex. >> we're looking at a bit of a mixed picture in the oil markets with brent crude now leading the gains we're seeing here in oil.
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keep in mind that as its regained its premium. s this is a pull back we're seeing in wti from the 16-month highs. a lot of traders waiting to see what the american petroleum institute data on inventories would show later this afternoon and what the energy department says tomorrow. we've been talking about the parity that was reached between these two benchmarks for crude oil. first time in nearly three years that happened. when that happened earlier, but will this really last? goldman sachs doesn't believe it will. they think it will last a few weeks, maybe a few months but by 2014 we'll see that divide closer to $8 to $9 between the two contracts. in terms of the gold market, of course, there was a ton of momentum and interest in gold yesterday as we saw gold rise about $45 in one session. a lot of key technical levels that were broken there, and now it looks like gold is hanging tight here and giving back some of the gains. the key level to watch $1,325 to see if that support is maintained going into the close. back to you. >> sharon, thanks very much for that. now, more on this crazy and important story. goldman sachs and other banks may be manipulating aluminum prices making each can of soda you drink more expensive. today congress is investigating. they're holding a hearing on capitol hill. eamon javers joins us with the details in washington. >> well, it's a senate banking subcommittee holding that
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hearing going on right now and they're expecting this question of whether or not the big banks should be allowed as they have been to get involved in the commodities business owning and transporting physical commodities assets. all this comes in the wake of a new york "new york times" story over the weekend which revealed that goldman sachs folks have bought themselves an aluminum warehouse company and are involved in the aluminum warehouse building. "new york times" raising the question about whether or not that activity actually raises the price of aluminum artificially for all american consumers who buy beer or soda or other things that involve aluminum. now, sources close to goldman sachs however defend the process. they say there's nothing wrong. this is a free market. i can tell you at this hearing there's nobody from goldman sachs but the big banks have come under intense criticism. take a listen. >> historically congress has acted when a few large firms exploited their advantage and
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sought to control too much. congress must honor that history and curtail big bank activities in commercial business or else we're destined to view 2008 as the first financial crisis and not the worst. >> so, guys, all of this being put in the context of the 2008 financial crisis at least by critics of the process but again as i say, goldman sachs and others defend it and say, look, this is a free market just like any other. no reason we shouldn't be allowed to be involved in this business. >> eamon, a big story. we know you're on top of it. we'll talk to you soon. let's bring in bob pisani looking at what's moving at the big board. thought we were going to have a dip to buy, bob. >> i think the important thing is we're getting very small gains on very modest volume but i'm reasonably optimistic we might be able to move sideways through the summer. a couple reasons why. number one, economically sensitive stocks, we're getting a lot of them this week, particularly companies like dupont, for example, united technologyings, freeport-mcmoran, all came in with acceptable earnings. they're all to the upside here.
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freeport has had a terrible time recently. the other reason i'm optimistic is companies are generally promising the second half will be better and more importantly they're not dramatically lowering their guidance overall. look at dupont. this is very typical of dupont. we anticipate second half earnings will be significantly better than last year's second half. utx made a similar comment. so did illinois tool works. a lot of companies saying the same thing. if you look at the estimates, what's going on so far for the third quarter which is what mattered, we're expecting 5.6% on the s&p 500. july 1st it was 6%. that's not a huge difference. they're not dropping estimates that much. that's a sign they're all trying to hold the line in the second half and say we're going to make earnings and we're not going to be cutting the numbers sig karntly. for the current quarter, everybody is interested. fair, no the a great quarter. 3.8% growth. i think we can get the 5% to 6% still. microsoft and google really messed things up. better than feared. growth has accelerated a little bit. let me show you the other reason
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i'm a bit optimistic. there seems to be a lot of money on the sidelines. remember what happened in june. huge outflows from bond funds. look at this. $60 billion. this is according to alliance and morningstar. outflows into bond funds, but only modest inflows. $7 billion into stock funds. where the heck is all the money gone? it's looked like most of it has gone into cash. there was almost $100 billion going into simply deposits in the month of june and into early july. i think that's money on the sidelines that could come in. finally, let me show you an ipo here. one heck of an ipo. phillips 66, oil pipelines. the old spinoff from the company. 19 to 21 priced at 23. now $30. anything having to do with oil and gas infrastructure, paying dividends, anything like that, guys, doing really well today. here is one stock. this is an ipo. >> for once it was fortuitous timing on the ipo. 30%, one of the bigger pops we
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have seen. >> anybody looking for yield, that's the key with the oil and natural gas pipelines. >> people forget the ten-year is it still at 2.5%. the price of gold coming off its best day in nearly a year. the one and only art cashin will be here to talk about it when we come back. customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. all business purchases.
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coming up next on the half. he's got the 3406s like buffett and a track record to prove it. we're going to get stock picks from a man known as the oracle of tampa. plus, another record for the dow as earnings come in better than some had expected. how high can stocks really go? and a big debate over where netflix goes from here. carl, we'll see you in about 15. >> sounds good, scott, thanks. this sunday "new york times" article getting a lot of play this week. it even seems to be fanning the blames of some gold conspiracy theorist. art cashin is here to help us make sense of it all. you say all that glitters is not arbitrage. what did you make of this story? >> well, you know, the conspiracy -- first of all, gold has been around for thousands of
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years and it's been involved in some spon conspiracies. you would think that some of the gold bugs would naturally opine into the conspiracy theory crowd. i'm not a conspiracy theorist. i think that tends to be the guy who picks the gray horse and when the gray horse loses thinks that the race was fixed. but that having been said you've got a couple things going on here. there are theories going around about accountability for gold and storage. it started with the central banks. when the germans asked to see their gold back, et cetera, et cetera. it men morphed into the large international banks who in many cases are custodians for gold holdings either through thee tfs or whatever. and suspicion began to arise that that maybe all the gold that was supposed to be there wasn't there. that prompt prompted the conspiracy theory that maybe those bigbacks were having a bear raid on gold because if the price of gold goes down, people aren't so anxious to peek behind the curtain and see if you have everything you said. that got aa little extra strength recently about what's called a backwardation in gold in which the current price is
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higher than the near futures price a month out or two months out. normally you would fix that by something called arbitrage which would be you would sell the higher priced spot gold and buy the contract one month out and sit back on your hands and collect actually a riskless thing. nobody has been really doing it so that's fed more of the conspiracy. see, people don't think it's there, people think you can't get it picked up, and along comes the front page "new york times" article about large banks, metals warehousing, and hinting pretty strongly at maybe chicanery and manipulation. that i think got the gold bugs crazy and that helped prompt one of the most spectacular short covering spikes and rallies we saw yesterday. >> the connection between what we're seeing with structure there and oil, we asked dennis gartman about that this morning saying do you think something is amiss and he pointedly said no,
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we've seen that pattern play out over the years and the past. nothing nefarious going on here. >> i agree with the fact that we've seen backwardations. in fact, there was a gold backwardation in the middle of the crisis back around '08 or '09 i think. but with all due respect to my very dear friend dennis, when enough people believe it, and you have to remember in today's age of the internet and the blogosphere, everybody has got their own little networks. they're all out there talking about it. >> some would argue, some are arguing, if there's manipulation going on, why is alcoa sitting at the lows. why is aluminum pricing so weak? >> they're not a bank with a warehouse. they're an aluminum company. no, i agree. the idea of manipulations going on for a long period of time are very rare. you know, you can ask the hunk brothers about that, okay? things can go to an extreme and people will find a way to break them up. >> art cashin. >> my pleasure. >> another big day for earnings as many top companies are
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reporting this morning. our earnings squad is here to tell you everything you need to know in just a moment. plus, one of the most expensive mansions in the country is going up for auction. nbc's janet shamlian is there live in miami beach. janet? >> reporter: hi, kelly. this is the infamous ver kashi mansion in south beach. it is going up for auction, as you said, at a bargain rate. we're going to get an exclusive look inside these famed gates coming up when "squawk on the street" continues. ♪ [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr
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welcome to the earnings squad. we dissect the earnings story everyone is talking about. miami hel lis sa lee. joined by mary thompson and josh lipton. to the scorecard with 26 of s&p 500 companies reporting. 64 beat their eps targets, 11% met estimates. 25% of reports have come in below. let's kick it off with big earnings watchesers. lexmark hitting levels it has not seen after 2 1/2 years. margins declined, the company's profit more than doubled on a large one-time gain from the sale of its ink jet business. second quarter mortgage insurer mgic swung to an unexpected q2
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profit. shares of mgic trading up more than 11% right now. texas instruments leading the nasdaq 100 following itsq2 earnings result yesterday. josh lipton is here with some analysis. >> you saw texas instrument report pleases the street. everybody was busy raising their price targets. i think the basic theme is texas instruments getting out of that wireless chip business, low margin wireless. has to complete with qualcomm and other rivals. working hard to get its chips into televisions and cars so a better mix. you talk to analysts they say look at the fund free throw flows. there's a lot of concerns about high-end smartphones, pcs and what the growth trajectories will look like. >> it's really interesting because we have seen this time and time again in terms of weakness in gaming consoles, weakness in hand sets, weakness in pcs. texas instrument is completely reflecting what's going on -- what we've seen so far in earnings season strength in the industrial as well as the automotive sides of the business. the question here is valuation.
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at a 21 pe. it's more richly valued and it's been underperforming the philadelphia semiconductors so far this year. the question here is do you continue to ride this one even though it is giving this an because always had a strategy, we're going to keep price is high. that isn't working because of these radar apps. geico comes out, progressive, in order to maintain margins, they're also cutting expenses which includes homeowners by
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10%. so let's just take a look at how the auto business has done so far. the retention tate on the policyholders has held steady about 80%. but new business in auto down 22%. yes. >> more and more cars are being sold. >> yes, but people are are going to the cheaper, they've been buying insurance more on price. they see price as part of the component on that. travelers saying that feel that all that advertising has in consumers mind they have to get the best fit. >> it's trained us. they know they can find a better price. >> then the pif. policies enforced. down 12% quarter over quarter. again, all of this through auto policies sold through agents. >> just quickly, what you need to know even though copper prices coming down, its earnings call, its press release, it is willing to cut expenses and that
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is key for the miners. that's why we're seeing the stock move higher in today's session. the costs are coming down year on year, but it's saying 2013, 2014, we're going to cut expenses by $1.9 billion. tweet us, we'll be back with much more on street signs. next, one of the most expen save watches is on the auction block. in just a moment. probably the car. cause as you get older you start breaking down. i love my car. i want to take care of it. i have a bad wheel - i must say. my car is running quite well. keep your car healthy with the works. $29.95 or less after $10 mail-in rebate at your participating ford dealer. so you gotta take care of yourself? yes you do. you gotta take care of your baby? oh yeah!
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the mansion that once belonged to versace is now on the auction block. janet shamlian has the story in beautiful miami beach. >> it's beautiful today, too, pretty hot. this is where he lived. in fact, it was on these steps where he was gunned down 16 years ago. this infamous multi-million dollar mansion is now going on the auction block and we got an exclusive look behind these very gates. south beach. once the home to versace, the luxurious mansion is up for auction. >> i believe it's probably the most one of a kind, unique
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properties that have been on the auction process. this is going to be the auction of the century. >> the home was built in 1930. 23,000 square feet. ten opulent bedrooms and 11 bathrooms with a gold lines and mosaic tile out, frescos in and a gorgeous view of the atlantic ocean. >> everywhere you walk on this property, it's opulent. it's showy. it's everything that versace was with the most magnificent taste. >> he bought the mansion in 1992 for close to $3 million and spent a reported 33 million renovating it. >> this is an amazing place. wild parties. versace called upon everyone from princess diana to elton john to cher as his friends. >> versace was murdered on the front steps in 1997. shot to death by a suspected
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serial killer who later committed suicide. three years later, an entrepreneur bought it and converted it into a boutique hotel and club. it was listed for $125 million. this past may, the price was reduced to 75 million. >> there's nothing, nothing, that is iconic like this as the history, the beauty, the location. it's priceless. it's hard to set a value on something like that because it's only one. >> the mansion is now in bankruptcy court and will be auctioned off september 17th with a starting bid of 25 million. >> there's never been a property like this sold via the auction process, so to me, will make the record books. >> to own your mansion is to own a piece of south beach his atoh. >> yeah, we've now moved over to the somewhat modest pool where conceivably, the new owner could
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be sunning him or himself by act. the auction is going to be auction 17th and if the prospect of decorate ed 25,000 square fe is somewhat daunting, don't worry. the furnishings are included. a lot of work. >> beautiful shot. thanks so much, janet shamlian at the versace mansion in miami beach. meantime, dow in a narrow range here. some things, dow components. >> the dow is positive. s&p has turned negative, but utx is helping it stay in the green. utx is up about 2% after earnings that weren't that spectacular, but the company talking about signs of industrial demand in the second half of the year. i think it increased the lower end of its guidance, carl, something to that extent. travelers is weighing on the dow, so it's a bit of a tug of
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war. >> utx seeing a return to organic growth. flatten the quarter, but down. like dupont said, might be better than expected. also, wendy's ceo on "power lunch." >> plenty of people lining up for a bacon cheeseburger. >> let's get to wapner and the halftime. >> thanks so much. welcome. four hours to go until the close and right there on the washington is where we stand. it's a mixed day on the street. dow's got a modest gain. here's what we're following on the half. the oracle of tampa, he's bought it and has the returns to show for it. what are the super stock pickers new plays? net gain is netflix a subscriber miss? your signal to sell. one stock, two traders, one big debate is just ahead, but first, our top story. the earnings effect.

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